Eurozone Bond Yields Spike Amid Fiscal Uncertainty

Eurozone bond yields rose as market expectations for European Central Bank rate hikes increased. German and French bond yields climbed, influenced by EU borrowing plans for Ukraine's defense and political uncertainty in France. Fiscal concerns are also growing after European leaders agreed on a new €90 billion loan.

Eurozone government bond yields surged on Friday as traders raised predictions for future European Central Bank rate hikes. French debt movement was in line with its peers after lawmakers failed to reach an agreement on the 2026 budget.

German bond yields rose early in the session following the EU's decision to borrow an additional €90 billion to fund Ukraine's defense, rather than tapping into frozen Russian assets. German 10-year yields, a benchmark for the eurozone, increased by 4 basis points, reaching 2.88%.

Markets have also taken into account political uncertainty in France and potential emergency legislation for budget approval. There is a risk of snap elections, which could further widen the yield spread. Fiscal concerns are rising with EU's loan move, pushing long-dated bonds under pressure, as Germany's 30-year yields hit a fresh high.